Peak oil predictions  

Posted by Big Gav in

The Guardian has an article on peak oil saying it is clean energy that will bring about the end of the oil age - Peak oil predictions.

It's now a truism – among oil companies, and governments alike – that even in an age when we risk catastrophic climate change, and its attendant catastrophes such as we've seen in the Gulf of Mexico this week, oil exploration is an inevitable part of our future. It may be a truism, but is it true?

As former Shell CEO Jeroen van der Veer has said several times, the era of "easy oil" is over. This means that the bulk of the oil that is left to exploit is to be found in the tar sands and in ultra-deep water and other marginal resources, such as the Arctic. All of these resources are very expensive to produce, require long lead-in times to bring on-stream and, in many cases, have controversial environmental and social impacts that will cost more to ameliorate.

Even without addressing the social and environmental costs, the break-even point for these kinds of oil projects is close to the ceiling at which oil prices could be sustained by the global economy. At between $65 and $90 a barrel, the room for long-term profitability appears slender. With the global economy remaining in a fragile state and oil prices rallying, it's important to ask whether the economy can withstand further price increases, not to mention whether the climate can sustain further growth in carbon emissions.

Will the expense of bringing this oil to market mean that the sustained oil prices needed to produce the oil will also consistently drive the global economy back into recession?

At the launch of BP's most recent Statistical Review of World Energy in early June 2009, BP's chief executive, Tony Hayward, said that as the oil price went over $90, consumers "began to change their behaviour" and that there was significant "elasticity of demand above $100 a barrel". In other words, if it costs too much, we can't – and won't – buy it.

The difference between the recovery periods following previous oil shocks and the current one is that a significant proportion of today's oil demand is in permanent decline. This particularly applies to developed countries where demand for oil is past its peak. In other words, this recession has triggered demand destruction, not demand suppression.

It's possible the day of "peak oil" has arrived – but not in the way everyone expected. Instead of peak oil, we're looking at a peak in demand for oil. The oil age won't end tomorrow, but the idea that it will go on for ever – with its attendant catastrophes and tragedies – is seriously in question.

Against this backdrop, the economic case for investing in clean technology becomes as clear as the environmental case. The faster we introduce efficiency in the transport sector, making better cars that use less fuel, adopting cutting-edge hybrid technology and pushing vehicle electrification, the faster the oil industry of the last century will be replaced by the cleaner, safer and economically more sound industries of today.

2 comments

Larry Langman   says 12:20 AM

I note that the original of this article has to date generated 166 comments, but on this site, I appear to be the first.
I think John Sauven proposition that "a significant proportion of today's oil demand is in permanent decline" should be put in the "wishing and hoping" catagory.
I note for instance that in the April 13 IEA Monthly Outlook Report a lift for 2010 over 2009 is projected. While not yet back to the heady days of 2007, demand appears definitely in recovery.
And as to his final paragraph, about our need to rapidly move to an all electric fleet....to quote the great Darryl Kerrigan "Tell him his dreaming."
I will leave it to others to comment on the amount of resource, time and energy it would take convert our national fleets.

Errr - of course the original has all the comments - this is mostly just a collection of links for people to go and read (plus the occasional original post, which will usually generate more comments at the Oil Drum than here anyway).

The car fleet turns over every 20 - 30 years - hat's how long it will take us to shift to electric vehicles...

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